UPDATE: The state budget signed by Gov. McCrory in August 2014 allocates $10 million in grants for film, commercial and TV production. It sets new limits on how much productions need to spend to qualify for a 25 percent rebate and caps how much projects can receive. Movies must spend at least $5 million, TV series must spend at least $250,000 per episode, and commercials must spend $250,000. No project can receive more than $5 million. The current plan that expires at the end of 2014 requires any production to spend at least $250,000 and has no cap.

PREVIOUS ANSWER: This answer was updated in 2011 and verified in 2012. It’s how the film incentive worked before it was revamped by the General Assembly in 2014. It is no longer the system used in North Carolina.

North Carolina offers what amounts to a rebate on money spent in the state, an incentive meant to make filming in North Carolina more attractive.

Filmmakers and legislators justify this by pointing to the “secondary” taxes put into the state treasury by film productions through other sales, gas, employment, property and other taxes. Some critics, however, wonder why the film industry should be singled out for special treatment and whether North Carolina can compete with packages offered by other states and still benefit.

Here’s how the plan works:

To qualify for the incentive, a production must prove it has spent at least $250,000 within the state. Withholding taxes still must be paid.

The company then files form NC-415, which triggers an audit. Once all the rules are determined to have been followed, tax collectors cut the production a check for 25 percent of that money. The check may not exceed $20 million.

For example, if Sony Pictures spent $300,000 in lumber, paint, wardrobe, rental cars and all the other incidentals that make movies happen, the company would receive a check for $75,000.

Compensation and wages paid to individual employees (up to $1 million) on which withholding payments were remitted to the N.C. Department of Revenue are eligible for the tax credit regardless of whether they are paid to residents or non-residents.

These bills raised the incentive from 15 percent to 25 percent and raised the production cap from $7.5 million to $20 million. The new bills also expanded the list of what is defined as a qualifying expense and eliminated the 6.9 percent corporate income tax which allows the production company to receive its full 25 percent benefit.

But there was also a movement to do away with the $1 million cap on highly compensated individuals. This measure did not pass the General Assembly.

Pro-incentive folks argue that these changes would attract the mega-million-dollar blockbusters to the state. And that tourism from film fans and other factors provide benefits that can’t be calculated by accountants. I’ve interviewed people who also point to the environmental factor. They say that unlike some industries that emit harmful pollutants, movie-making is pretty clean.

Those against any kind of film incentives argue that if preferential treatment is given to one industry, it should be offered to all industries in North Carolina. Many point out that the state’s once thriving textile and furniture industries were left out in the cold, leaving thousands without jobs. Some also argue that as other states inch up their incentives packages, North Carolina will be forced to do the same, possibly creating a fiscal environment that may not be beneficial for the state.

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